Tax break rule to get approval, officials say

CARSON CITY -- The light is about to turn green for companies interested in cashing in on tax breaks from the state for their environmentally friendly construction projects.

What is expected to be a final draft of a rule establishing who is eligible for sales tax abatements and property tax breaks for "green" construction projects had a brief and favorable hearing Wednesday before state officials.

The rule will go to the state Office of Energy and the Tax Commission for adoption. Lawmakers also will review and are expected to sign off on the language early next month for it to take effect.

State administrators had to craft a regulation that met the approval and addressed the concerns of the lawmakers and others.

Some local government representatives had worried that previous versions of the regulation might allow the breaks to be applied too liberally and so affect their revenues and ability to provide services to taxpayers.

Dino DiCianno, executive director of the Tax Department, said the latest version is the result of a lot of hard work by casino and other business representatives, state staff and lawmakers.

"I think people got together and tried to compromise with respect to the language to move this thing forward," he said. "To me the bottom line was wordsmithing. We tried to make it very specific and clear to everyone involved."

Shaun Jillions, representing Henderson, said the new language is acceptable to the city.

"We agree that it has been a long, tedious process over at least six months, if not longer," he said in his testimony. "I think we're at the point where everyone doesn't like a little bit about the language and likes some of it, and that's probably a good thing."

Sen. Randolph Townsend, R-Reno, who has been involved in the development of the legislation and the regulation, said he thinks the latest incarnation will see approval and help ensure that no companies feel compelled to sue the state over who is eligible for which benefits.

"Has the balance been struck? Yes, I think so," he said. "But we have to remember the reason we're doing this is because the cost of energy is becoming so astronomical. In the long term, obviously, I wish we could do more. But we'll have to address that next session. The debate will go on."

DiCianno said the final version of the regulation extends a generous sales tax abatement to six companies that had sought the breaks after passage of a 2005 law promoting green construction.

The issue of which companies would get the tax abatement, which will be unavailable to any other projects, was a point of contention between some lawmakers and some project representatives.

The projects eligible for the abatement, if they qualify under Leadership in Energy and Environmental Design standards, are the CityCenter project being built by MGM Mirage; Fontainebleau; The Venetian's Lido/Palazzo projects; the Molasky Corporate Center; the Echelon Place project by Boyd Gaming; and the Panorama Towers project. All are in Clark County.

The projects, and any others constructed under the new legislation, are eligible for property tax breaks also, depending on which LEED standard they achieve: silver, gold or platinum.

The debate over tax breaks for green construction became an issue in the 2007 legislative session. Lawmakers introduced a new bill replacing the 2005 measure out of a concern the breaks were too liberal and would harm the operation of local governments and public schools.

An analysis done in May suggested that local governments and schools were in line to lose nearly $1 billion in sales and property taxes over 15 years under the more generous 2005 version of the green construction bill.

The new measure and accompanying regulation greatly reduces the potential property tax impact. Only the building, not the property, will get the break, and school property tax revenues are not affected.